A model fund? Five-step guide to explore possible funding for lower-priority drug trials

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In this article, Ben van der Schaaf, principal at Arthur D. Little, gives a five-step guide to explore possible funding partnerships for lower-priority drug trials — a new model for big pharma.

Today’s clinical trials can cost biopharma companies upwards of $100 million1 before they even begin to consider additional investment in marketing and distribution of new life enhancing therapies. For those major drug companies that spent the last decade building a robust pipeline of early stage compounds and indications, these sky-high development costs mean they have a wide portfolio of potential assets without the resources to get them through trials.

The result? Pharmaceutical businesses with strong R&D pipelines are losing billions each year in potential revenue while promising new therapies lay dormant, waiting for patents to expire.

Innovative big pharma strategists are looking to a new partnership model to claw back some of these costs, and allow more new therapies to proceed to the development and clinical trial stage. Working with CROs, universities and patient advocacy organisations, drug makers can identify investors who see the value in their promising compounds and indications, and will provide the capital and share the risk involved in getting new therapies through the development stage, regulatory approvals and launched to market.

Finding partners to fund lower priority drug trials takes careful planning. Consider this five step investment roadmap as a guide.

1. Identify relevance

When reviewing the portfolio of de-prioritized new therapies, drug makers must make tough choices about which clinical trials will attract external investors and be profitable once in market. Trials need to be relevant and complementary. Relevance of a trial is based on its potential market demand, and will predict the value of the development asset it gains regulatory approval.

Packaging several trials in the same therapy area is attractive for investors and will reduce upfront costs. Even trials in the same therapy area need to be complementary — geography, indication, trial duration, patients, etc. — to realise operational advantages and identify the right CRO to execute them.

The partnership must demonstrate a real transfer of risk if it is going to help the drug maker develop its assets without adding development costs to its bottom line. That means that actual risk needs to transfer from the biopharma company to other parties. A clinical trial with a 95% probability of success would not satisfy this requirement, as it would just be a financing arrangement packaged as an investment.

2. Attract partners

A successful partnership will bring together the biopharma’s science and data; the CRO’s trial operation capability and capacity; and the investors’ funds, along with their knowledge of structuring and exiting these types of transactions. Finding the right CRO will be based on their location, track record and expertise in the relevant therapy area.

Finding the right investors takes careful targeting and multiple approaches. These could be venture capitalists specialising in biopharma, non-profit organisations and patient groups with a focus on a specific therapy area, or other investors with interest in a specific disease area or public health issue.

3. Establish an operating model and structure

Once partners are committed to the project, the next step is to develop a legal structure and financing arrangement. The new entity could be a joint venture or special-purpose entity, established solely to operationalise and manage the execution of the included trials, with governance by representatives from all partners.

Setting clear goals for each partner and performing a full risk assessment are key steps to ensure the new organisation’s success. The risk assessment must include thorough due diligence and a well-defined exit strategy that ensures all partners agree the potential outcomes and have clear roles in delivering the final goals.

4. Operationalise and execute

For the next two–four years this new entity will work to complete development on the selected potential therapies. This requires establishing processes and roles upfront to ensure efficient and effective operations. Consider the following four areas before operations begin:

  1. Technical — have you established a protocol that can deliver the clinical data required to support an increase in product value?
  2. Commercial value — is the market assessment valid, and is there real revenue potential for the drug(s) coming out of it?
  3. Operational — are the trials in question designed in such a way they can be executed efficiently and on time, to deliver the necessary cost savings? Are the proposed trials operationally complementary?
  4. Cultural — have the partners agreed shared norms and working arrangements that will ensure successful progress and a clear exit once the investment value has been realised?

5. Exit

Partnerships must have a clear, pre-agreed process for closing out relevant trials, realising value for each partner in line with the contract, and effectively dispersing or disposing of accrued assets.

The pharmaceutical industry has a proven track record working in partnership at the drug discovery and marketing and distribution stages. Extending the partnership model to funding clinical trials is a natural next step for those drug makers with robust R&D pipelines, and will result in improved value creation for companies and improved quality of life for patients.

Reference

https://aspe.hhs.gov/report/examination-clinical-trial-costs-and-barriers-drug-development